NEW YORK (TheStreet) -- Beijing-based Youku Tudou (YOKU) stock is soaring 11.75% to $17.50 in early afternoon trading on Tuesday, after poor August economic data prompted analysts to speculate that the government will again intervene to stimulate Chinese markets.
Economic data released by China today showed that both exports and imports fell in August, though exports fell at a lower rate than expected, according to The Wall Street Journal.
The discouraging data has led some analysts to speculate that the Chinese government will intervene with stimulus measures, Reuters reports.
"It could be a case of bad news is good news," Piotr Matys, an emerging-markets strategist at Rabobank, told the Journal.
China's central bank has so far cut interest rate five times and lowered banks' reserve requirements several times since November, but the world's second largest economy has failed to rebound, the Journal reports.
Separately, TheStreet Ratings team rates YOUKU TUDOU INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate YOUKU TUDOU INC (YOKU) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- YOUKU TUDOU INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, YOUKU TUDOU INC reported poor results of -$0.71 versus -$0.58 in the prior year. For the next year, the market is expecting a contraction of 918.6% in earnings (-$7.23 versus -$0.71).
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 139.8% when compared to the same quarter one year ago, falling from -$22.99 million to -$55.15 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YOUKU TUDOU INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The share price of YOUKU TUDOU INC has not done very well: it is down 18.41% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 49.41% is the gross profit margin for YOUKU TUDOU INC which we consider to be strong. Regardless of YOKU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, YOKU's net profit margin of -21.24% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: YOKU Ratings Report